Aha! Here's what I've been looking for: Back-end BTB 1.25!
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--OPINION:------------------------------------------------------------------
Solid Bookings Growth Inline With Strong Equipment Earnings Reports
Inline with the upside earnings announcements of the equipment companies
for the December quarter, overall equipment bookings rose by a healthy 8% in
December, versus our estimate of 8%-10% sequential growth. While we had
expected similar strength from both the front-end and back-end equipment
companies, the back-end was disproportionately stronger with bookings
growth of 15% versus the front-end growth of 5%. However, shipments grew at
a much slower pace than what we had expected with an overall 1% sequential
growth versus our expectations of 5%-7% growth. Back-end shipments
actually declined by 4% with front-end shipments growing 3%. We find the
shipments decline difficult to understand in the context of the 20%-30%
sequential revenue growth posted by most equipment companies, and we
believe that it could be revised up over the next few months. This slow
increase in shipments resulted in a higher than expected total book-to-bill of
1.18 versus the expected 1.13 - 1.15 range. Front-end book-to-bill of 1.15 was
in the low end of our 1.15 - 1.18 range with the back-end book-to-bill of 1.25
well above our estimate of 1.08.
Total Book-To-Bill Rises To 1.18 From 1.10
SEMI's December book-to-bill rose sharply to 1.18 from 1.10 in November as
bookings grew as expected while shipments grew at a more modest rate.
Total U.S. equipment bookings rose 8% to $1,833 million after a 6% growth in
November. Shipments, however, only grew 1% sequentially to $1,558 million
after 4% growth in the previous month. The slower than expected rise in
shipments led to a total book-to-bill which was in the high end of our expected
range.
Front-End Book-To-Bill Rises Slightly To 1.15 From 1.12
The front-end book-to-bill fell in the low end of the expected range at 1.15, up
from 1.12 in November. Bookings increased 5% to $1,309 million after a
similar 5% increase in the previous month. After strong December quarter
commentary from the front-end equipment manufacturers we had expected
stronger growth, but an even slower ramp in sales led to the uptick in the
book-to-bill. Sales grew 3% sequentially to $1,140 million after growing 4% in
November.
Stong Growth In The Back-End To 1.25 From 1.05
As in November, the biggest upside came in the back-end with the book-to-bill
rising sharply to 1.25 from 1.05 in the previous month. Bookings rose by an
impressive 15% to $524 million versus a 9% rise in November. The spike in
the back-end book-to-bill was compounded by the 4% sequential decline in
back-end shipments to $418 million. Shipments rose 4% in the previous
month.
Year-Over-Year Comparisons Are Still Strong
Year-over-year shipments and bookings patterns are still very impressive as
the industry continues to grow at a rapid pace. Total bookings are up 107%
from December-98 after a 122% year-over-year improvement in November,
with shipments up 69% versus a similar 69% rise in the previous month.
Front-end bookings are up 93% (104% in November) with shipments up 67%
(61% in November). The most impressive year-over-year comparisons are still
evident in the back-end, with a 154% rise in bookings (190% in November)
and 77% increase in shipments (91% in November).
Total 1999 Bookings And Shipments Well Above 1998 Levels
1999 was an extremely positive year for the equipment industry and was a
sharp contrast from the terrible downturn of 1998. As such, total, front-end,
and back-end bookings and shipments for 1999 were well above the
depressed levels of the previous year. Total bookings for 1999 rose 60% to
$17.5 billion, front-end bookings also rose 60% to $12.9 billion, and back-end
bookings rose an impressive 64% to $4.6 billion from 1998. Shipments,
however, rose by a more modest rate as equipment companies started to
build more backlog. Total shipments rose 9% to $15.1 billion, front-end
shipments rose 11% to $11.2 billion, and back-end shipments rose 2% to
$3.8 billion.
Orders Surpass The 1997 Cycle Peak For Both The Front And Back-End
This is the first month in which both the front and back-end surpassed the
peak bookings level achieved during the 1997 upturn. December's total
bookings of $1,833 million are now a healthy 12% above the November 1997
bookings of $1,633 million, with front-end bookings of $1,309 million also 12%
above the November 1997 peak of $1,170 million. Similarly, back-end
bookings of $524 million are a full 13% above the 1997 cycle peak of $463
million. We should see continued growth in bookings as the current upturn
has additional drivers (communications/networking/consumer) versus the 1997
cycle, which was predominantly PC driven.
Shipments Still Below Cycle Peak As Industry Builds Backlog
As the industry is more keen on building more backlog as compared to the
previous cycle, it is only the back-end which surpasses the 1997 peak levels
in shipments. Back-end shipments of $418 million are 4% above the peak
level of $401 million in December 1997. However, total and front-end
shipments are still off the November 1997 levels, illustrating the industry's
urge to build backlog. Total shipments are still 5% off the peak of $1,634
million and front-end shipments are 8% below the peak of $1,240. In addition,
for the first time in recent memory, the previous months' bookings and
shipments data were not revised (less than 1%), resulting in more meaningful
sequential comparisons.
Top Two Picks Are Lam Research And Teradyne
Our top two picks are Lam Research and Teradyne. We rate Lam Research
1H (Buy, High Risk) with a price target of $191, or 35 times our calendar 2001
EPS estimate of $5.46, and Teradyne 1H (Buy, High Risk) with a price target
of $98, or 40 times our 2001 EPS estimate of $2.45. |
